Don’t pigeonhole me

It’s natural to categorize people—put them into little boxes with other people sharing similar characteristics. And there are certainly a few boxes into which I might comfortably fit. But I often see commenters put me in the wrong box, based on a misreading of my actual views.

For the most part, I’m neither an optimist nor a pessimist about the macroeconomy. I’m neither a monetary hawk nor a dove. I’m neither a foreign policy hawk nor dove. I’m neither a left-winger nor a right-winger. I’m neither a Democrat nor Republican. I’m neither pro-Israel nor pro-Palestinian. I could go on and on.

That’s not to say I’ve never offered an optimistic or pessimistic take on the economy. But my baseline view is that the market forecast is optimal, despite the fact that the market forecast almost never turns out to be precisely correct.

As an analogy, if the Eagles were favored by 3 over the Chiefs in the Super Bowl, then I would forecast the Eagles to win by 3. But I’d also assume that the odds of that precise outcome occurring are probably less than one in ten. For the economy in 2024, I see some risk of both recession and excessive inflation, even as a soft landing appears to be the market forecast.

This is why I believe it is impossible to reliably predict the business cycle; you’d be predicting Fed failures. I can predict that drunk drivers and inflation targeters will have more accidents than sober drivers and NGDP level targeters, but I cannot predict precisely when those accidents will occur. People try to avoid having accidents!

Similarly, I may seem hawkish at some times (2022) and dovish at others (2009), but my basic view favors 4% NGDP growth, level targeting. Because many people have a strong dovish or hawkish bias at almost all times, I get lumped into a box with people who interpret something I said as suggesting that I have a consistent policy bias in one direction or another. I do not.

On foreign policy, I oppose neoconservative adventurism. Instead, I favor blocs of like-minded non-aggressive nations that promise mutual help in the event an evil outside power invades one of their members. If that group becomes large enough, then no outside power would dare to invade. As an analogy, 48 states came to the aid of Hawaii in 1941, despite the fact that Iowa had little fear of a Japanese invasion. The bigger this mutual self defense group becomes, the better.

This view makes me seem hawkish when the alliance is attacked, and dovish when it is not attacked. (Yes, there are ambiguous cases, such as when to provide financial aid to non-members that are being attacked, or what to do about piracy on the high seas, terrorism, etc.)

Although I am neither particularly optimistic nor pessimistic about the near-term course of the macroeconomy, I do have views on other issues. I’m relatively pessimistic about the fiscal situation, which is likely to get worse in the medium term. I’m also pessimistic about the medium term global political situation, as the rise of nationalism is likely to produce bad outcomes. These worries are related, as populism underlies both trends.

In the long run, the global political cycle will turn again. I just hope it doesn’t take a disaster such as the two world wars before people wake up to the folly of nationalism.

Merry Christmas everyone. And when you go into the voting booth in 2024, remember to ask yourself: What would Jesus do?

Giovanni Battista Tiepolo:



16 Responses to “Don’t pigeonhole me”

  1. Gravatar of Junio Junio
    25. December 2023 at 09:09

    Merry Christmas, Scott!

  2. Gravatar of Philo Philo
    25. December 2023 at 10:49

    Your self-description looks attractive. When I go into the voting booth in 2024 (or fill out my absentee/mail ballot), I plan to write in “Scott Sumner” for President, just as Jesus would do (if he had the right to vote in the U.S.).

  3. Gravatar of ssumner ssumner
    25. December 2023 at 19:30

    Junio, Thanks. Merry Christmas to you as well.

    Philo, I hope you aren’t in a swing state!

  4. Gravatar of Sara Sara
    25. December 2023 at 20:31

    “favor blocs of like-minded non-aggressive nations that promise mutual help in the event an evil outside power invades one of their members.”

    I understand. But this is precisely the type of thinking that leads to violence.

    First of all, we promised Russia that NATO would not expand.

    Have we kept that promise?

    No, we haven’t.

    Did Kiev abide by the Minsk agreement, which called for a cease fire and for granting certain rights (autonomy) to Donbas in 2015?

    Sadly, Kiev didn’t abide by the agreement.

    So because another country (in this case Russia) doesn’t agree with NATO expansion, and NATO involvement in a civil war on their border — you call them ‘evil’?

    ‘Evil’ for not agreeing with you. That doesn’t sound very peaceful to me.

    Russian engaged for three logical reasons:

    1) Because Donbas asked them to engage.
    2) to stop a conflict raging on their border, which deeply affects Russian citizens
    3) to send a message to Washington that Russia will not sit idly by as NATO continues to expand in their direction.

    NATO is extremely aggressive. I wish we were the good guys, but we are not. It’s inconcievable that we would attack Iraq for no logical reason (allegations with no proof), funnel money through NGO’s for the purpose of inciting an insurrection and rebellion (i.e., regime change) in Libya, Syria, Ukraine, Nicaragua, Afghanistan, Cuba, Bolivia, Colombia, etc, etc, and then call ourselves ‘peaceful.’

    Call me crazy, but I fail to see how instigating wars, directly and indirectly, is ‘peaceful’

    I would also like to point at that you called religion a ‘cult.’ If my memory serves me correctly, Edward, the Filipino, mentioned something about life beginning at conception, and your response was that he was living in a cult. Maybe I’m being too hard on you, but I find it bizarre that some people call religion a cult for 364 days of the year, then say Merry Christmas on the one day that involves receiving material gifts.

    It’s like yelling at your wife for 364 days, then saying “I love you” on the last day of the year. It’s almost pathological.

    And just one comment on NGDP. There is a very big difference between finding a fundamental truth inherit or instrinsic to the law of nature itself, and creating models which sometimes work and sometimes don’t.

    A mathematical model that works 90% of the time would have no value, so why do these so-called ‘social scientists’ believe they should be held to a different standard?

    To put this another way: concepts of supply and demand are fundamentally true. Economists have found this law of nature. Economists have also found marginal utility which solved the water diamond paradox, and which was a profound observation. Such an observation is always true. It cannot be refuted.

    What’s not profound is a model that sometimes works and sometimes doesn’t. This type of hueristic modeling, which Ricardo engaged in, and which the monetarists can trace to Fischer or possibly even back to Hume, has to be a psuedoscience.

    Even a supercomputer with the capability of analyzing every conveivable variable would not be able to account for subjective preferences — therefore making it worthless.

    This is the only problem I have with the monetarists.

    My main issue with you, specifically, is not your economic ideas, but your politics. I think your political views will lead to a civil war in this country, to the total destruction of enlightenment principles, to the centralization of power, and ultimately to a totalitarian dystopia.

  5. Gravatar of Edward Edward
    25. December 2023 at 21:29

    Scott, thinks that if we centralize power into a supranational we’ll be able to protect ourselves from tyrants. But centralizing power never creates peace because noble organizations become tyrannical once they achieve a certain degree of size and power. Ever since the collapse of the Soviet Union, NATO has become a global terror organization for the simple reason that nobody was strong enough to counter its power and influence.

    Jesus wouldn’t support indiscriminate bombings of civilians. He was not fond of liars either. Calling Trump a racist, Hitler, and a dictator is a bold faced lie. Calling protesters insurrectionists is a lie. Telling people that we have to censor speech to save speech and remove political opponents to save democracy is a lie. Hitler once told Germany they needed to suspend democracy to save democracy, which is now a CNN talking point.

    When Elon bought Twitter, CNN also called for the nationalisation of twitter. That’s also what Hitler did. He nationalised all means of communication.

    Jesus would vote for Trump, which is why the Catholic church sends nuns to his rally. You don’t see any nuns or priests at Biden’s rally’s.

  6. Gravatar of Junio Junio
    25. December 2023 at 21:59

    Scott, do you think there would be some type of backlash on the part of opposing nations against these blocs of like-minded nations? This would probably spiral into a debate between IR schools of thought, but how would you view the assumption that state-actors pursue their self-interest, trying to maximize their ‘power’ and security?

    PS: Is it just me or does Edward and Sara always reply on the same posts? Strange.

  7. Gravatar of Ricardo Ricardo
    25. December 2023 at 22:34

    Jesus was a populist, not an elitist.

    Merry Christmas.

  8. Gravatar of spencer spencer
    26. December 2023 at 04:32

    re: “it is impossible to reliably predict the business cycle”

    Predictions are easy. All you have to know is the legal reserve path. I.e., the monetary base equals required reserves, interbank demand deposits period.

    As Dr. Richard G. Anderson’s, Ph.D. Economics, Massachusetts Institute of Technology (the world’s leading guru on bank reserves) explained:

    “legal reserves are driven by payments”, payments being “total checkable deposits”.

    You must understand that the FED covered its ELEPHANT TRACKS.

  9. Gravatar of spencer spencer
    26. December 2023 at 04:40

    American Yale Professor Irving Fisher said, “Economics is an exact science”. He used the most disabused metric, the G.6 Debit and Deposit Turnover release:

    “Changes in business activity are closely linked with changes in the volume of money payments made by check, of which bank debits provide the best available single indicator…”

  10. Gravatar of spencer spencer
    26. December 2023 at 05:02

    The most egregious error in economics is that banks are said to “lend deposits”. That is wrong. Deposits are the result of lending.

    This error manifests itself in a variety of ways. The worst is that savings are said to be a source of loan funds. That is wrong. All bank-held savings are derivative to the system. There is just a shift from demand to time deposits. The payment of interest on deposits by any individual bank just results in a redistribution of deposits within the commercial banking system. I.e., the banks pay for the deposits that they already own.

  11. Gravatar of David S David S
    26. December 2023 at 05:33

    Merry post-Christmas Scott, and thanks for keeping this blog going.
    Looking at life as a series of probabilities rather than certainties is a tough thing to do. Here’s a quote from Charlie Munger:

    “We look for a horse that has one chance in two of winning, and pays three to one”

    Your post was a lot more positive than the Christmas day tweet from the ex-president. Holy moly.

  12. Gravatar of Todd Ramsey Todd Ramsey
    26. December 2023 at 07:23

    Great, clear, articulate post. Thanks for this and for all your blogging.

    I disagree about the wisdom of supporting a corrupt non-NATO government that didn’t sufficiently prepare for its own defense. But I can see that although I disagree, a good case can be made for supporting Ukraine.

  13. Gravatar of ssumner ssumner
    26. December 2023 at 11:07

    Junio, Some sort of pro-Russian source is financing a bunch of trolls, and wasting their time and money. No one reads this comment section.

    David, Munger was a great man—sad to see him pass away. He had wise words on our relationship with China.

  14. Gravatar of spencer spencer
    26. December 2023 at 14:07

    re: “you’d be predicting Fed failures”

    Economists don’t know a debit from a credit, money from liquid assets, a bank from a nonbank.

    George Selgin is a good example: “I’m glad to see, upon reading on, that Prof. Summers explains himself in the comments. Still, I was taken aback upon first seeing this tweet by him attributing SVB’s troubles to its having done what all banks always do!” (borrowing short to lend long).

    Another good example:

    spencer, “banks don’t lend deposits.”

    Clueless BS. You keep posting it, and I’m really tired of seeing it and deleting it. So take this to heart. I will say this only once:

    1. The banks have a liability called “deposits” on their balance sheet. This is the amount they owe their depositors.
    2. When you put $100 in the bank, the bank makes two simultaneous entries on its balance sheet:

    1. It credits your deposit account with $100 (increases the amount it owes you);
    2. It debits its asset account “cash” with $100 (increases its cash balance by $100).

    3. The bank can then do whatever with this cash in its asset account, such as lending it to consumers, lending it to the government (buying Treasuries), or lending it to the Fed (depositing the cash in its reserve account at the Fed).

    4. If the bank lends this $100 cash to a consumer, it credits its asset account “cash” with $100 (lowers its balance) and debits its asset account “consumer loans” with $100 (increases its balance).
    This is a hugely important concept for you to understand. If you deposit $100 in the bank, the bank takes this cash and does whatever with it, including lending it out. What else is it going to do with your $100 in cash? Eat it? Plus it notes down that it owes you $100.

    If you and everyone else want each their $100 back at once, the bank will say, sorry, we lent this cash to some people to buy a house with, so we no longer have this cash that we owe you, and if you all keep wanting your cash back, we’re going to collapse (= run on the bank = SVB).

    A basic accounting course (where you learn about debits and credits) at your junior college is the best investment ever. I encourage everyone to do that.

    See Richard Werner

  15. Gravatar of spencer spencer
    26. December 2023 at 14:10

    Banks pay for their earning assets with new money period.

  16. Gravatar of Michael Sandifer Michael Sandifer
    29. December 2023 at 11:53


    You’re strength is that you’re more solid on the fundamentals of economics than even the most celebrated economists. You’re also a talented communicator and teacher.

    That said, there have been many, many needless misunderstandings over the years, because you’re not more explicit about what you believe and why you believe it. This is probably one reason why you’re sometimes mischaracterized.

    The most recent example was the exchange over which baseline to use for the pre-pandemic NGDP trend line. The approach I took, using the most recent 5-to-10 years prior to the pandemic was also used by many economists I could cite, and I did cite a couple of them at the Treasury Department. We had a needless back and forth about it, until you finally made your point clear.

    Perhaps this was such a simple and fundamental point to you that it was difficult to imagine others would need it explicitly stated, but we often do need it explicitly stated. That even goes for many PhD economists, which is an unfortunate comment on them and people like me, but it is the truth nonetheless. The majority of people, including PhD economists, are less sound on the fundamentals of economics than you are, and are generally sloppier with data and even basic numerical reasoning. That even goes for economists who have more formal education in math than you do.

    This is one reason why I’ve only very gradually come to understand your perspectives since I started reading the blog in May of 2009. Since last week, I now understand much better why you see future US NGDP growth as likely being below 4%, sans a productivity boom. I acknowledge my own shortcomings intellectually, of course, and you’re not to be blamed for that, but this is just one of many, many examples over the years in which you’ve talked over the heads of people who are trying to understand your perspectives.

    You understand human intellectual shortcomings very well, but nonetheless, seem to routinely overestimate the degree to which explaining your positions in more detail would obviate the need for so much back-and-forth.

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